I’ve been a journalist for more than 20 years writing about business one way or another. Everything I‘ve learned in all this time can be boiled down to one truth: finance, transportation, marketing, supply chain - no matter what the original subject is all roads lead back to sales.

If Verizon Et Al Follow Windstream's Move To Become A REIT, Will Customers Finally Get Better Service?

Windstream Corp. is a telecom service provider based in Little Rock, Ark., that astounded its larger more sophisticated counterparts in the industry this week by announcing plans to spin off its network assets into a REIT.

It is being called a game changer for the industry because presumably other companies like Verizon, AT&T, Time Warner Cable and Comcast will follow suit to reap the tax savings. Here is where I am hopeful: if and when they do, customer service in the cable industry will finally start to improve.

But first, for those not familiar with this particular vehicle in the commercial real estate, allow me to translate: what Windstream is proposing to do is form a type of public company in which at least 90% of its taxable income goes out the door in the form of shareholder dividends each year; in other words they don’t generally retain their earnings.

They are usually, but not always, listed on a stock exchange.

Most of these companies tend to focus on one of the traditional real estate assets classes, such as office or retail or industrial or–everybody’s favorite these days–apartments. Increasingly, though, companies in non-traditional sectors such as providers of billboard advertising, cell phone towers and document management services have moved to become REITs to take advantage of the tax savings.

Furthermore, when one of these companies make this move others in the industry feel obliged to at least consider it, if only to make sure they are not losing out on a tax advantage that their competitors are getting. Think of it as a politically acceptable form of inversion but without the move overseas.

But here is the kicker—REITs tend to adhere to transparency and good governance best practices and lately, when they haven’t in a handful of cases, activist shareholders were able to successfully stage management coups.

Now, back to Windstream. It plans to spin off its network assets into a REIT and lease back those assets in a structure in which the new REIT will earn about $650 million in income from the master lease and Windstream gets restructure about $3.2 billion from its debt.

I am not familiar with Windstream’s customer service specifically, but the industry as a whole in this regard is pretty much a bottom-feeder in terms of favorable rankings.

Kagan has his doubts about whether if these companies were to become REITs it would make a difference in their customer service policies and procedures, but my stance is, it could, at the margins. At the very least, customer service levels couldn’t get any worse under a REIT structure.

Now, another digression on a topic few people need much education: telcos’ customer service record. I really don’t have to stretch that far back, merely by a few days, to find a few telling examples.

There is the now infamous phone call of a customer who tries mightily to quit Comcast only to be deflected at every turn by a service rep bound and determined to retain him. As subsequent coverage made clear, Comcast has merged its service and sales functions into one defacto entity with the emphasis overwhelmingly on sales. A call to Comcast to ask about spotty reception could well turn out with the customer ending the call sheepishly, having been talked into an unplanned upgrade.

Verizon doesn’t get off free here, either. Just yesterday Federal Communications Commission Chairman Tom Wheeler—who used to work in the industry and has been accused of favoring companies over consumers—took Verizon to task for its plan to reduce data speeds for heavy data users on unlimited data plans. These are the company’s oldest customers (Verizon and AT&T stopped offering these plans years ago but these customers have been grandfathered in) yet Verizon is choosing to single them out because they had the good fortune to secure a great deal. Wheeler didn’t exactly say it that way but that is certainly one interpretation. This is what he reportedly wrote to the company in a letter on the matter:

It is disturbing to me that Verizon Wireless would base its ‘network management’ on distinctions among its consumers’ data plans, rather than on network architecture or technology.

Will any of this change if—and it is a big if—these companies become REITs?

“This is all new, the industry only started thinking about it this week when Windstream made its announcement,” Kagan says.

He doesn’t think, though, that telecom REITs will treat their customers any differently than a standard telecom company does. To be sure, there is nothing in the review and shareholder approval process that would address this issue.

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